Effect of Turnaround Strategies on Organizational Performance of Commercial Banks listed in Nairobi Stock Exchange

Abstract

The current economic crisis being faced by many financial institutions like commercial banks has pushed a number of them to engage turnaround strategies to survive. However turnaround strategies have yielded inconsistent and conflicting empirical findings thus necessitating further empirical enquiries. The purpose of the study was to examine effect of turnaround strategies on organizational performance of Commercial Banks Listed in Nairobi Stock Exchange. The study objectives were to examine the effect of turnaround strategies namely; downsizing, business process reengineering, bank restructuring, and divestment strategy on organizational performance of Commercial Banks Listed in Nairobi Stock Exchange. The study was grounded on resource-based view theory, contingency theory and financial intermediation theory and strategic choice theory. The study adopted descriptive survey design and targeted; risk managers, corporate affairs managers, human resource managers, finance managers, Accounts managers, audit managers and strategic managers form each of the 12 commercial banks listed on NSE in Kenya. Therefore, the target population was 96 respondents where a census method was used to select all respondents to participate in the study. Self-administered structured questionnaires were utilized to collect primary data from the respondents. Pilot test was conducted to ensure content validity, while Cronbach alpha was used to test instrument reliability. All collected data were coded, cleaned, tabulated and analyzed using descriptive and inferential statistics with the aid of specialized Statistical Package for Social Sciences, version 24. Descriptive analysis such as frequencies, means, and standard deviation were utilized; analyzed data was presented in tables and graphs. Inferential statistics assessed nature and the strength of the relationships. The relationship between variables was achieved through the use of correlation analysis. Regression analysis results indicated that all the independent varaibles; downsizing strategy, Business process reengineering strategy, Bank restructuring and Divestment strategy had positive and significant effect on organizational performance. The study concluded that turnaround strategies significantly affect organizational performance of listed commercial banks in Kenya. The study recommends that most companies should be very cautious when applying downsizing strategy in order to avoid downsize without figuring out how to reduce the workload. Organizations that are seeking for success in the industry sector in which the company is doing business should conceptualize the concept of Business Process Reengineering. There is need for the banks willing to go restructuring way to consider carefully the mode of restructuring they need to adopt among the financial, portfolio and organisational. These modes have different implications and they meet different needs and target certain objectives. Therefore there is need to match the objective and relevant the strategy.